With regard to reimbursements for employee expenses which of the following statements is correct? A) If reimbursements equal expenses, and the employee makes an accounting of expen... With regard to reimbursements for employee expenses which of the following statements is correct? A) If reimbursements equal expenses, and the employee makes an accounting of expenses to the employer, the reimbursements are excluded from the employee's gross income. B) If excess reimbursements are not returned, or if the employee does not substantiate them, the reimbursements are included in the employee's gross income, and none of the expenses are deductible by the employee. C) If excess reimbursements are returned to the employer, and the employee substantiates the expenses, the reimbursements are excluded from the employee's gross income. D) All of the above are correct.
Understand the Problem
The question is asking for clarification on the treatment of employee expense reimbursements in terms of gross income. It requires an understanding of the tax implications of reimbursements based on various scenarios presented in the options.
Answer
All statements (A, B, C) are correct.
All of the above statements are correct: reimbursements equal to expenses and accounted for are excluded from income; unreturned excess reimbursements or those not substantiated are included in income; returned excess with substantiation is excluded from income.
Answer for screen readers
All of the above statements are correct: reimbursements equal to expenses and accounted for are excluded from income; unreturned excess reimbursements or those not substantiated are included in income; returned excess with substantiation is excluded from income.
More Information
Employee expense reimbursements are generally excluded from gross income under accountable plans, which require substantiation and return of excess. If these conditions aren't met, reimbursements are considered taxable income.
Tips
A common mistake is not properly documenting expenses or failing to return excess reimbursements, thereby making them taxable.
Sources
- What Are Employee Expense Reimbursements and Are They... - justworks.com
- Start or review an accountable plan - Journal of Accountancy - journalofaccountancy.com
- Publication 15-B (2025), Employer's Tax Guide to Fringe Benefits - IRS - irs.gov
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